Based on a preliminary reference from the Italian Constitutional Court, the Grand Chamber of the Court of Justice of the European Union has ruled for the first time on the scope of natural persons’ right not to self-incriminate in punitive administrative proceedings (Case C-481/19, DB v. Consob).
The case at hand dealt with preliminary questions referred by the Italian Constitutional Court (order No. 117/2019) on the applicability and scope of a natural person’s right to remain silent during administrative proceedings that may lead to the imposition of sanctions of a criminal nature. In the at-issue case, the accused had to defend himself during a proceeding before the Consob (the Italian stock exchange authority) in the context of an investigation into alleged insider trading and market manipulation, which, under certain conditions, constitute criminal offenses.
According to the Court of Justice, which backs the orientation of the European Court of Human Rights (“ECtHR”), the protection of the right to silence of natural persons under Article 6 of the European Convention on Human Rights (“ECHR”) should be extended to their statements on facts in administrative proceedings when findings of the latter could become evidence in a criminal trial.
Background to the decision
In 2012, Consob concluded an administrative proceeding for insider trading pursuant to Article 187-bis of Legislative Decree No. 58/1998 (Consolidated Law on Financial Intermediation, or “TUF”), during which the defendant—a natural person—had refused to show up at the hearing. Later, when he did finally appear, he repeatedly refused to answer the questions posed by the authority, invoking the right not to incriminate himself. Consob accordingly fined him not only for insider trading, but also for his uncooperative behavior.
The decision issued by Consob was upheld by the Court of Appeals of Rome. The defendant therefore filed an appeal with the Court of Cassation, claiming the sanction relating to refusal to cooperate with the authority was unconstitutional. The appeal was brought on the grounds of violation of the right to remain silent, as recognized at the national and European level in Articles 24 and 111 of the Italian Constitution and Article 6 of the ECHR. In its decision (order No. 3831/18), the Supreme Court called upon the Italian Constitutional Court to decide on the constitutionality of Article 187-bis TUF in relation to Articles 24, 111, and 117 of the Constitution and Article 6 of the ECHR.
The Constitutional Court found the penalty to be in conflict mainly with Article 24 of the Italian Constitution, which provides a high level of protection to the right to avoid self-incrimination. However, the Court also found that, at the EU level, Article 14(3) of Directive 2003/6 (“Market Abuse Directive”) and Article 30(1)(b) of Regulation No. 596/2014 (“Market Abuse Regulation”) clearly impose a duty to sanction the accused for failure to cooperate or to comply with an investigation, inspection, or request from a supervisory authority.
To address this inconsistency, the Italian Constitutional Court referred two preliminary matters to the CJEU. Namely, it first requested that the CJEU interpret Sections 14, para. 3, of the Market Abuse Directive and 30, para. 1, let. b), of the Market Abuse Regulation, establishing whether they set forth an obligation or leave broad discretion to Member States to criminalize cases of “non-cooperation” with the authorities responsible for market supervision. Second, the referring court asked whether these secondary EU law provisions could be interpreted consistently with the right to remain silent found in Sections 47 and 48 of the Charter of Fundamental Rights of the European Union (the “Charter”) and read in light of Article 6 of the ECHR, as interpreted by the relevant ECtHR case-law.
The CJEU judgement
As a preliminary remark, the CJEU noted that that the right to silence is “a generally recognized international standard which lies at the heart of the notion of a fair trial,” (§38) even though Article 6 ECHR does not explicitly mention it.
The rule nemo tenetur se detegere (no man is bound to accuse himself) is well established in all European legal systems, although it is not mentioned in the ECHR or in the Charter. The same right is also lacking in many national constitutions (including the Italian one) but has been recognized over time by the courts, both at the national level (as a corollary to the right to defense set forth in Article 24 of the Italian Constitution) and at the European level.
The right to silence is not only related to self-incriminating statements but also covers information that may be used as evidence in parallel or subsequent criminal proceedings against the person concerned (§44).
However, the court also added that this right does not justify every failure to cooperate, and is not relevant to actions such as refusals to appear at a hearing or the use of delaying tactics designed to postpone it (§41).
In this context, the CJEU found that the Market Abuse Directive and Market Abuse Regulation shall be interpreted consistently with the right to remain silent found in Sections 47 and 48 of the Charter, not requiring penalties to be imposed on natural persons for refusing to provide the relevant authority with answers that might establish their liability for an offense that could lead to criminal sanctions or to administrative sanctions of a criminal nature.
Toward the right to remain silent for legal persons?
While the Consob decision on the existence of natural persons’ right to silence in punitive administrative proceedings is clear, the same principle seems not to be granted for legal persons, especially in traditional models of fact-finding investigation based on the duty of cooperation with the relevant authority.
Past decisions of the CJEU in proceedings seeking to establish infringement of competition rules established that legal persons cannot be compelled to admit unlawful anti-competitive conduct but can be compelled to provide all necessary information or to disclose documents that are in their possession, even if the latter may be used to establish the existence of anti-competitive conduct (e.g., see Case C-374/87, Orkem v. Commission, October 18, 1989; Case C-407/04, Dalmine v. Commission).
The Consob decision cites these principles and makes clear that the protection for natural persons is wider than that granted by the case-law for legal persons.
The question remains whether the Consob decision may be leveraged to obtain stronger protection for companies in certain cases, such as cases of market abuse where both natural and legal persons may be involved under different regimes of criminal and quasi-criminal liability.
In fact, market abuse administrative investigations may trigger prosecution not only of the individuals who committed the offense but also, according to Legislative Decree No. 231/2001, of the employing company that benefited from the unlawful behavior.
In this scenario the broader right to silence recognized by the Court of Justice for natural persons might be exercised by the associates of a company involved in an investigation, to the benefit of that same legal entity.
 In paragraph 42 of the decision, the CJEU explicitly listed three criteria that are relevant in assessing whether penalties are criminal in nature: “[t]he first criterion is the legal classification of the offense under national law, the second is the intrinsic nature of the offense, and the third is the degree of severity of the penalty that the person concerned is liable to incur.”